The Hawaii Department of Commerce and Consumer Affairs, Business Registration Division (BREG) is the place to go when starting a Hawaii corporation. Before you register with the BREG, it is important to decide whether you will form a C or an S corporation. This distinction pertains primarily to the corporation’s size, how you can be taxed, and how many shareholders you will have.
Hawaii Business Express is the online submission portal for most of the filings associated with the formation of Hawaii corporations. If the paperwork and process seem overwhelming, ZenBusiness is here to partner with you and provide insightful, professional assistance.
This guide will take prospective owners through every step of the business formation process. You can also find explanations for the different Hawaii corporations, a complete fee schedule, and links to appropriate government forms.
How do I form a corporation in Hawaii?
Steps to Incorporate in Hawaii
- Name Your Corporation
- Appoint Directors
- Choose a Hawaii Registered Agent
- File the Hawaii Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Hawaii Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit Your Corporation’s First Report
To officially start a corporation in Hawaii, you must file the Articles of Incorporation with the BREG. It’s good to go over the basic guidelines about forming a corporation in Hawaii early to have an overview of the requirements. Before you register your new corporation, you may have to do a bit of legwork.
To simplify the process of forming a corporation in Hawaii, we’ve put together 10 easy steps to form your business:
Step 1: Name Your Hawaii Corporation
The first step in the formation process is deciding on the best name for your company. It is crucial to choose a name that properly represents and reflects your company. This name also needs to align with Hawaii’s legal requirements. For instance, certain words such as “bank” or “insurance” cannot be used without government permission.
Hawaiian domestic profit corporation names must also contain one of the following words or its abbreviation:
- Corporation (Corp.)
- Incorporated (Inc.)
- Limited (Ltd.)
It’s a good idea to review Hawaii’s rules for corporate name reservation. Once you have come up with a shortlist of potential names, you need to make sure they are not in commercial use in Hawaii. You can conduct a corporation name search online through the BREG website.
Now that you have selected your Hawaii corporation’s name, you may want to reserve it to ensure no one else registers something similar before you can. To reserve your corporation’s name, you have two options in Hawaii. You can reserve your name online or fill out and mail the name reservation form with a $10 filing fee to:
State of Hawaii
Department of Commerce and Consumer Affairs
Business Registration Division
P.O. Box 40
Honolulu, Hawaii 96810
Either method of application saves your Hawaii corporation name for 120 days.
Sometimes a corporation will want to operate under a name other than its legal name. This is usually referred to as a DBA, which stands for “doing business as”; in Hawaii, the term is “trade name.” Most states require you to register a DBA before doing business under that name, but not Hawaii.
Still, Hawaii does give you the option of registering a trade name. This might serve the purpose of helping dissuade others from using the name, but it doesn’t legally prevent them from doing so. In Hawaii, ownership of a trade name is acquired mainly by adopting and using it. That being the case, the Application for Registration of Trade Name does encourage you to check the online business name database, the telephone directory of each island, the city directory, and the Department of Taxation to see if your desired trade name is already in use (after all, whoever is using the name will already likely have established its use). The cost of registering is usually $50, but it’s been reduced to $25 until January 1, 2021.
Before settling on a name, make sure it’s not already trademarked. To do this, you can perform a trademark search on the U.S. Patent and Trademark Office (USPTO) website. This will help you determine if a similar trademark exists. You can register your trademark on the USPTO site if the name you want is available.
Trademarks also exist on the state level, and these apply only within the borders of a state. Unfortunately, Hawaii doesn’t have a database like the USPTO for checking these, so, if you want to make sure your name is free of Hawaii trademarks, you’ll need to contact the Department of Commerce and Consumer Affairs at (808) 586-2727.
Step 2: Appoint Directors
The next step is appointing a board of directors. These individuals will be responsible for determining and implementing corporate bylaws, policies, and general business procedures.
You can review instructions associated with the official filing before determining your initial directors. You can always elect more or make changes later at annual shareholder meetings or via company rules you establish in your corporate bylaws.
Hawaii mandates the listing of at least one initial director but does not put constraints on how many directors you may place on the board of your Hawaii corporation. There are also no laws stipulating who can serve this function for your business.
Step 3: Choose a Hawaii Registered Agent
Now you will need to choose a registered agent. Your registered agent can be a person or entity identified in your Articles of Incorporation. This person or entity will represent you and your business by receiving important legal documents and government correspondence related to your business.
Hawaii law requires that all registered agents be physically present and authorized to transact business in the state. A street address in Hawaii will be required, as P.O. boxes are not permitted. Your registered agent also needs to be 18 years of age or older and available at the stated street address during regular business hours, 9 a.m. to 5 p.m., Monday through Friday.
You have several options in choosing a registered agent for your Hawaii corporation. A shareholder, director, professional agency, or you may serve as the registered agent. However, utilizing an outside registered agent service has distinct advantages. Take into account these important considerations before you make a decision:
- Discretion: If your business is sued, having a registered agent service keeps you from being served papers at your place of business in front of clients.
- Privacy: Anyone in your Hawaii corporation, including yourself, who chooses to serve as the company’s registered agent forfeits a degree of sensitive information. That person’s private information becomes a matter of public record, becoming searchable, which can be uncomfortable or unwanted.
Step 4: File the Hawaii Articles of Incorporation
At this stage, it’s time to file your Hawaii Articles of Incorporation. This is when your Hawaii corporation becomes legitimized in the eyes of the state government. It’s required that the Articles of Incorporation be filed and accepted before you can conduct business.
- Name and mailing address of the corporation
- Name and official address of your corporation’s designated registered agent
- Number and type of all shares offered by your Hawaii corporation. This Articles of Incorporation form may only be used to start a corporation with common stock. If the corporation needs a different or multiple share class structure, you must compose your own Articles of Incorporation.
- Name and address of each incorporator
You will need to pay a $50 filing fee and can obtain expedited processing for an additional $25.
You can mail the Articles of Incorporation to:
State of Hawaii
Department of Commerce and Consumer Affairs
Business Registration Division
P.O. Box 40
Honolulu, Hawaii 96810
Step 5: Create Corporate Bylaws
Hawaii law requires you to create corporate bylaws. This is where you can explain your company’s operating procedures, management structure, and internal regulations about your business. It also establishes the time, place, voting rules, and procedures for your corporation’s annual meeting.
In establishing corporation bylaws, below are some suggested items to include:
- Voting rights of shareholders
- Responsibilities of the board of directors
- Stock shares
- Procedures for record-keeping
- Required number of shareholder meetings
Step 6: Draft a Shareholder Agreement
Next, you’ll need to generate a shareholder agreement. This document functions as a written contract between the shareholders of your company and the corporation. It spells out the rights and responsibilities of the shareholders and establishes rules about who can buy shares.
Your shareholder agreement will need to align with your established corporate bylaws. Every shareholder in your Hawaii corporation will need to read and sign this document to signify official agreement with its contents.
You should also fully explain how stock share processes will be managed. Financial disclosures and procedures should be highlighted and context provided to any facets of the corporation that relate to or could impact shareholders.
Step 7: Issue Shares of Stock
You will now need to issue stock shares for your corporation. This is where you need to make sure that the number and type of shares listed in your Article of Incorporation are not exceeded.
While shares can only be issued one time, they can be sold and traded. Familiarizing yourself with Hawaii’s laws on issuance or transfer of shares is a good idea. Available capital is a must for your corporation to issue stock. Capital refers to the money required to form and run your corporation.
You have two options as to how you choose to sell the stock shares of your Hawaii corporation. You can sell:
- Privately to founders, directors, officers, private investors, etc.
- Publicly on the open marketplace
Deciding to make your stock public comes with federal reporting guidelines. You will be mandated to provide the U.S. Securities and Exchange Commission (SEC) a quarterly stock statement once you go public. These statements will contain detailed accounts of all stock information pertinent to your Hawaii corporation and function as a means for the federal government to monitor your corporation’s compliance with federal law regarding stock sales.
Step 8: Apply for Necessary Business Permits or Licenses
The type of business or service that your Hawaii corporation will participate in determines the initial licensing you will need to become fully operational. Additional professional licensing and/or licensing required by the county or city in which you do business may also be required.
Certain industries, such as those providing regulated items like fuel or liquor, require specialized licensing to do business in Hawaii. Researching the requirements of your specific professional field and those of your county and city governments can help you know what permits your Hawaii corporation will need.
Hawaii has a “General Excise Tax License” that is required by nearly all businesses, but it’s more similar to a sales tax than a license, so we’ll cover that in the next section.
Because licensing can be federal, state, or local, there’s no one central place to check to ensure you have every license and permit your corporation needs. You’ll have to do some research or hire someone to do it for you.
Step 9: File for an EIN and Review Tax Requirements
All Hawaii corporations must register with the IRS to obtain an Employer Identification Number (EIN). Your company’s EIN functions in much the way that a Social Security number functions for an individual. It is a means for your corporation to borrow money, open bank accounts, and hire employees. The EIN is also how the IRS identifies your Hawaii corporation’s appropriate taxes.
Thankfully, applying for an EIN is simple and costs no money. You can fill out the online form on the IRS website and receive your EIN immediately after.
Reviewing the specific state tax requirements that apply to your Hawaii corporation is also prudent. Hawaii corporations are required to register with the Department of Taxation and obtain a Hawaiian tax ID (HI ID) for state income tax purposes.
Obtaining your HI ID is a process completed at the same time as your business registration if you registered online through the Hawaii Business Express portal. If you mailed your registration, you would need to complete form BB-1 online or by mail.
All Hawaii corporations must also pay a general excise and use tax (GET) on gross business income. The GET effectively takes the place of a state sales tax because business owners often pass it on to the consumer. You can find out more about the GET here.
Step 10: Submit Your Corporation’s First Report
As a final step, you will need to prepare your company’s first annual report. This is a mandatory statute that allows your corporation to continue to receive state contracts and remain in good standing with the Department of Commerce and Consumer Affairs. Failing to file an annual report in Hawaii for two consecutive years can result in your corporation being involuntarily dissolved.
Your annual report will contain basic public information about your business entity, but nothing about financial matters. Annual reports may be filed online for $12.50 or via the paper form for $15 and mailed to:
State of Hawaii
Department of Commerce and Consumer Affairs
P.O. Box 40
Honolulu, HI 96810
How much does it cost to start a corporation in Hawaii?
The overall expense of forming your Hawaii corporation will vary depending on how you choose to file and how much, if any, use you make of an outside agency. Other factors that can influence the total cost are the licenses and permits that will apply in accordance with your industry and local governments.
The bare minimum that you can expect to pay to become legally recognized is $50 for your Articles of Incorporation. Keep in mind that you cannot legally do business without also registering with the Department of Taxation.
The following is a breakdown of the basic fees associated with forming a Hawaii corporation:
- Fee for name reservation: $10
- Fee for registered agent services: Variable
- Fee for filing the Articles of Incorporation: $50
- Fee for reservation of domain name: Variable
- Fees for business licenses and permits: Variable
- Fee for the annual report: $12.50 online, $15 mailed
Review the complete fee schedule for starting a corporation in Hawaii to determine what may apply to the founding of your business.
If you want to form right, get in touch with the professionals at ZenBusiness. With our business plans, we can help you streamline the filing process, provide you with reliable registered agent services, and provide a customizable corporate bylaws template.
What are the benefits of a corporation in Hawaii?
When deciding to form a corporation in Hawaii, you may wonder if that business type is preferable to other structures for your business. Most business owners who choose to incorporate in Hawaii do so because of the built-in protections this particular business model provides. A few of the legal and financial benefits of choosing to form a corporation in Hawaii include:
- Protection of your personal assets: As a corporation owner, your personal assets and finances are exempt from scrutiny or seizure if your company runs into financial difficulties.
- Liability control: If legal trouble finds your corporation, you will not be held liable for any lawsuits brought against your company.
- Stock options: The ability to issue shares of your corporation greatly increases your company’s chances of growth.
- Global opportunity: Being able to do business as a corporation opens up the global market to your company and means it is not limited to doing business solely in the U.S.
- Local profile: Prestige and recognition come with incorporating, and this step allows for interested investors or clients to take your company more seriously.
It is equally important that potential business owners know the possible downsides of forming a corporation in Hawaii. Some include:
- Double taxation: Profits from C corporations are taxed twice, first at the corporate level and again when they are distributed to the shareholders.
- Strict reporting requirements: All record-keeping and meeting minutes must be meticulously kept for your Hawaii corporation. Failure to do so could mean legal recourse being taken by the state government and even the involuntary dissolution of your business.
How is a Hawaii corporation taxed?
Incorporating in Hawaii can be done in one of three ways. You can form a C corporation, an S corporation, or a nonprofit corporation. Most companies are registered as C corporations unless their founders have specified differently.
A C corporation is taxed separately from its shareholders. This leads to double taxation because the corporation is taxed on profits and then the shareholders are taxed again on those profits when they’re distributed to them.
S corporations are the structure style in which pass-through taxation can take place. S corporation income tax in Hawaii means the profits from the corporation are taxed to its shareholders. Every shareholder will report their share of the S corporation’s profits or losses on their personal federal and Hawaii income tax returns. S corporations bypass state income tax in this manner but still must pay GET on their gross business income each year.
Nonprofit corporations can apply with the IRS to be exempt from federal income tax. If successful, they will also be exempt from paying state income tax to Hawaii, and no separate application for tax exemption is required. However, Hawaii nonprofits will have to apply to be exempt from GET. You can review the tax guidelines for Hawaii nonprofits for more information.
Hawaii Corporation FAQs
- Does running a corporation in Hawaii involve more paperwork than running other types of businesses?
Yes, a Hawaii corporation will deal with more paperwork than other business types, like limited liability companies (LLCs). Beyond the rigid reporting requirements that Hawaii corporations must keep up with, there are also additional startup documents, like the shareholder agreement and bylaws, that do not apply to other types of businesses.
- What is the difference between an LLC and a corporation in Hawaii?
Hawaii not only defines LLCs and corporations differently but taxes them differently, as well. In general, LLCs represent a more simple and flexible business structure while corporations are a bit more complex depending on what corporate structure you choose.
- How do I change my corporation’s name in Hawaii?
You can file the Articles of Amendment to Change Corporate Name form online via the Hawaii Business Express portal or mail the paper form.
The fee to change your corporation name is $25.
- How many people are needed to form a corporation in Hawaii?
Corporations can be registered in Hawaii by just one person.
- Can I form my Hawaii corporation online?
You can file online via the Department of Commerce and Consumer Affairs Business Registration website.
- How do I dissolve my Hawaii corporation?
Hawaii corporations are dissolved via the completion and submission of form DC-13. If you would like to access this form digitally, you can do so by conducting a business name search on your corporation and selecting the “Forms” tab. The fee for filing this form is $25. The corporation is legally dissolved upon the effective date of its accepted Articles of Dissolution, and this date can be delayed up to 30 days from the date of filing.